Lawsuits accuse Tesla's Musk of fraud over tweets, going-private proposal

Enlarge  Musk

Tesla and its billionaire chief Elon Musk were hit by two new lawsuits yesterday, over claims that Musk's surprise proposal to take the company private was scheme created to target short-sellers of Tesla stock.

When Elon Musk took to Twitter earlier this week and said he was considering taking the company private again, and that he had "secured" funding, that sounded pretty ironclad.

The complaint alleges violations of US securities law and was filed Friday as a class action in federal court in San Francisco.

One plaintiff Kalman Isaacs said the tweets were false, misleading and they amounted to a "nuclear attack" created to "completely decimate" short-sellers.

The billionaire claimed funding had been "secured" for a deal which would value the firm at a price of $420 (£328) per share - more than double Apple's current value ($207 per share). The company is based in nearby Palo Alto, California. The share price later fell.

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The US Securities and Exchange Commission (SEC) regulator contacted Tesla to inquire whether Musk's statements were factual and why the disclosure was made on Twitter rather than in a regulatory filing, according to media reports.

Such investors have always been an irritant for Musk, who has sometimes used Twitter to criticize them.

Musk's tweets helped push Tesla's stock price more than 13 percent above the previous day's close. The main accusation against both is that they perpetrated a fraud on the shareholders of Tesla by misleading that the company is being turned into a privately held company.

But he added that the conduct of Tesla and its chief executive Mr Musk had caused volatility and cost short-sellers hundreds of millions of dollars.

According to the complaint, Isaacs bought 3,000 Tesla shares on August 8 to cover his short position, or bet that the price would decline, in the company.

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